The fear of a war in Iraq has set off a buying spree in traditionally safe-haven sectors of the market. But over the past two weeks, two such groups -- gold and bonds -- have not benefited equally. Since Dec. 5, the February gold futures contract has surged $20, or 6.14%, to $346.50. By contrast, the 10-year Treasury note has gained 2 points, or 2.5%, to 100 14/32. Among individual gold stocks, Newmont Mining ( NEM) has gained 9.4% to $28.04 in the past couple weeks, and Anglogold ( AU) has risen 8.4% to $32.04. Gold did better than the 10-year note again on Thursday after the U.S. told the United Nations Security Council that Iraq was in "material breach" of a resolution for declaring weapons of mass destruction. The difference in the performance of the two groups may be explained by the fact that day-to-day speculation has a greater effect on the gold market, where short-covering can drive prices up sharply. "Over the short term it is really impossible to predict if gold will continue on this tear," wrote Dave Skarica, publisher of the newsletter Addicted to Profits. "The short position is so huge we could see another round of panic buying. However, we could also see a very vicious pullback." The bond market has less volatility, since it is much bigger than the gold market. "The Treasury market is very deep," said Tony Crescenzi, chief bond market strategist at Miller Tabak and a contributor to RealMoney.com. "So speculation in it is less visible than it is elsewhere." Average daily volume in the bond market is $350 billion, versus $40 billion in the stock market. "If 50 people were speculating in both markets, the impact on gold would be far greater," said Crescenzi. Further, the Treasury market is a lot more closely connected to the stock market. According to John Kosar, senior research analyst at Bianco Research, there has been a 90% positive correlation between the S&P 500 and the 10-year Treasury yield, which moves inversely to price, since 2000.
"The muted reaction of the bond market reflects the stock market," Kosar said. "Stocks have basically gone sideways, while crude oil and gold -- which are pretty isolated -- have gone straight up." In the end, some say that the Treasury market may be a better gauge of true safe haven investing. "I think it is more of an indicator," said Holly Liss, market strategist at Mizuho Futures. "People have been talking about short covering in gold. The Treasury market is much harder to manipulate."